Monthly Archives: MARCH 2016

Vijay Mallya's Offer Via Video : Can pay Rs.4,000 Crore By September:

30.03.16 - pt team

Vijay Mallya has made an offer to banks struggling to recover more than Rs 9000 crores from his Kingfisher Airlines: he will arrange to repay 4,000 crores by September. His lawyers submitted a copy of the details to the Supreme Court today, which has given banks a week to respond.

According to a report by NDTV, Mr Mallya's uncomplicated exit from the country earlier this month incited political recriminations, with the opposition asking why the liquor baron who dubbed himself "The King of Good Times" was able to travel abroad at a time when banks are desperate for his airline, which stopped functioning in 2012, to repay its loans.

On Twitter, which he uses regularly, Mr Mallya, who is in the UK, has stressed that he is a parliamentarian who will obey laws and is not escaping his debts; however, the 60-year-old has refused to comply with two orders to make himself available for interrogation in Mumbai.

The judges asked his lawyers today when he plans to return to India; they responded that since he is available via video conference, there's no urgent need for him to head home, and he should not be considered an absconder.

It is not clear yet whether what Mallya is offering to banks is a One Time Settlement (OTS) of Rs4000 crore (while his total dues are Rs9000 crore) or whether he plans to pay the remaining amount too to banks.

For years, banks - many of them state-run - continued to loan Kingfisher Airlines vast amounts though its financial fractures were no secret. The CBI is investigating whether bank officials colluded with Mr Mallya to keep the money coming. Another aspect of the inquiry is whether Vijay Mallya siphoned large parts of the loan abroad, falsely claiming that he was settling bills for services like parking his planes at international airports.

The entrepreneur has denied all charges.

Mr Mallya inherited a fortune and then went on to multiply it largely on the strength of his best-selling Kingfisher Beer.

The Supreme Court on Tuesday asked the Securities and Exchange Board of India (Sebi) to initiate the process of selling 87 "unencumbered" properties of Sahara group, whose title deeds are with the market regulator, to generate the bail money for release of its chief Subrata Roy who has been in jail for two years now.

A three-judge bench headed by Chief Justice of India TS Thakur also asked the regulator not to sell any of the properties of the beleaguered group below 90 per cent of the circle rates.

The bench, also comprising Justice AR Dave and Justice AK Sikri, said the regulator will have to take its prior nod before going ahead with the sale of any property if it (Sebi) receives bids even below 90 per cent of the circle rate.

"You (Sebi) evolve mechanism and start selling the properties and we are passing the order to this effect," the bench said when the counsel for SEBI alleged that nothing concrete was happening on the ground.

For the interim bail of 67-year-old Roy, the court had put conditions like depositing Rs 5,000 crore in cash and a bank guarantee of equal amount and tough terms including payment of the entire Rs 36,000 crore, which includes interest. The money will be paid back to the investors of Sahara. Roy has been in prison since March 4, 2014.

The order, asking Sebi to proceed with the sale of properties, came when senior advocate Kapil Sibal, appearing for Roy, submitted that the group was finding it increasingly difficult to sell its properties in the current market environment.

The apex court asked Sahara group and Sebi to devise a mechanism under the supervision of Justice BN Agrawal to sell properties and seek help of "experts or expert agencies" if required in the process.

It also asked both the parties to constitute a committee for this purpose. Justice Aggarwal is currently overseeing the process of return of money to investors of Sahara.

The Sahara group said it has already submitted the title deeds to SEBI and the 86 properties do not include the "foreign properties of Sahara nor Aamby Valley City nor Sahara Star hotel." (PTI)

Sharp rises in education and healthcare costs in the last two years have hit India’s burgeoning middle class hard, denting Prime Minister Narendra Modi’s popularity among the relatively well-off ahead of a series of state elections.

Price increases for services deemed a luxury for most Indians could also complicate the central bank’s plans to cut borrowing costs, with decades of low investment in schools and hospitals meaning they will remain expensive for some time.

"Spending on my son’s education and medicine for the family has gone up sharply,” said Sambuddha Banerjee, a 47-year-old IT professional, who works for local government in Kolkata in the northeast of the country.

"The government also cut fuel subsidies and tried to impose taxes on our pension savings. This is not acceptable.”

Banerjee is thinking twice about voting for Modi’s ruling Bharatiya Janata Party (BJP) at elections scheduled for 2019.

That view is far from universal, but is already on the radar of a government that swept to power in 2014 with promises of economic reforms and pro-business policies that appealed to aspirational Indians living in big towns and cities.

Modi has already seen support among the huge agriculture sector ebb following several crop failures, so appeasing the middle class, which accounts for about a quarter of the 1.3 billion population, looks increasingly important.

"Rising prices of commodities and services which have a higher weight in the consumption basket of middle class households is an issue that cannot be ignored,” said a senior finance ministry official.

"This is a supply side issue and can’t be addressed in the short term,” he added.

To ease some pressure on middle income earners, the government plans to hike salaries of its nearly 10 million employees by 24 percent this year.

GOVERNMENT BACKS DOWN

Education costs have risen 13 percent, housing 10 percent, healthcare 14 percent and electricity 8 percent since Modi took charge in May 2014, time series data on CPI inflation collected by the Ministry of Statistics showed.

Food and beverage prices, meanwhile, which account for more than a half of the CPI basket, fell 10.5 percent since Modi’s election victory, although there, too, items like milk and eggs favoured by middle income Indians have actually risen.

Owners of motorcycles and cars are further upset that the government took away some windfall gains from falling oil prices in the form of taxes, and people across the country are cutting back on discretionary spending as expenses outstrip earnings.

Underlining the government’s sensitivity to a "squeeze” on the middle class, earlier this month it agreed to roll back plans to tax pension fund withdrawals following a backlash from salaried workers.

While national elections are three years away, the BJP’s popularity faces earlier tests, with ballots in states including West Bengal and Assam later in 2016, and the key battleground of Uttar Pradesh due next year.

RATE CUT

A disgruntled middle class also poses problems for Reserve Bank of India (RBI) Governor Raghuram Rajan, who has pledged to bring down consumer price inflation to 5 percent by March, 2017 and 4 percent in the medium term.

Headline retail inflation eased to 5.18 percent in February from 5.69 percent in January, but core inflation, which strips out food and fuel, rose to 4.9 percent from 4.75 percent, mostly due to increases in education, housing and personal care.

The RBI is widely expected to cut its policy interest rate by 25 basis points on April 5, after lowering it by 125 basis points last year thanks in part to easing inflation and the government’s fiscal consolidation roadmap.

"The spare capacity in the economy is not getting reflected in the core inflation number, which means the challenge for monetary policy to control the demand side pressure is much more,” said one senior policymaker, hinting at the difficulty of deep rate cuts beyond April.

That could be a bad news for middle income Indians who are looking to the central bank to bring down their borrowing costs, particularly after deposit rates fell.

The government slashed the federal pension fund rate and deposit rates offered to millions of small savers to align with market rates, triggering protest from opposition parties.

Despite the complaints, many are willing to give Modi more time to address their concerns.

"Our expectations of him were very high, and he needs more time to solve these age-old problems,” said Kundan Mukherjee, a 51-year-old from the eastern state of Jharkhand, who works for a pharmaceutical company.

A new black money estimate calculated by senior economists of the Bank of Italy has pegged Indian's undeclared assets parked overseas in tax havens to be between $4 billion (nearly Rs 27,000 crore) and $181 billion (nearly Rs 12.05 lakh crore) according to two different calculating methods used by them.

This is from the $6-7 trillion of the total black money which has been stashed away in the world, a report by a leading daily has said.

However, this new estimate only considers money parked in shares, bank deposits or debt securities. It doesn't money stowed away in real estate, art or gold, overseas.

This black money is held in tax havens using shell companies to hide the original company's credentials, the report says.

According to the report, the economists used data from the International Monetary Fund and the Bank of International Settlements (BIS) to calculate the figure.

The economists -- Pellegrini, Sanelli, Tosti -- however, said that this figure cannot be taken as "firm data" and should be "considered with great care".

Talking about India's share in the total black money pool, the economists shared two ways to calculate it:

-- Pegging India's black money pool to be the same as its contribution to the global GDP. At 2.5% in 2013, India's share in the total black money comes to about $152-181 billion.

-- The second method considers that India has stowed away as much amount in hidden assets as it has declared as investments. Calculating using this method, India's black money estimate comes to about $4-5 billion (nearly Rs 33,000 crore).

The economists quoted by the report, however, maintain that this is only a ballpark figure which hints at what lies buried.

In a crowded convention hall, young entrepreneurs practically shouted their ideas: an online marketplace for yoga instructors, an app to share songs in 30-second snippets, a mobile lunch delivery service aimed at office workers.

For any veteran of the go-go era in Silicon Valley, the buzz at the recent Surge start-up conference in Bangalore, the cradle of India's high-tech sector, was familiar and alluring. India's digital start-up scene is booming as Internet use expands. By June, more Indians are expected to access the Internet on their cellphones — 371 million — than the entire population of the United States.

That leaves nearly 1 billion Indians not yet connected, and as China's economy slows, U.S. tech companies and investors have turned increasingly to India. Venture capitalists have poured hundreds of millions of dollars into start-ups, and Silicon Valley giants such as Apple, Google and Facebook are courting Indians with their own initiatives.

"India has become, besides the U.S., the biggest opportunity still out there,” said Sanjit Singh Dang, investment director at Intel Capital, the venture capital arm of the Santa Clara-based computer chip manufacturer, which has invested in dozens of Indian start-ups.

Apple this month announced that it would open a 150-person office in the southern city of Hyderabad. Last year, while iPhone sales were flat worldwide, sales grew by 76% in India, prompting Chief Executive Timothy Cook to call the country an "incredibly exciting” market.

"The population in India is in some ways some of the best in the world,” Cook said during Apple's shareholder conference Friday. "There's a huge amount of young people moving up the ranks and the consumer will rise up there.”

The Cupertino company still commands just a 2% share of the Indian smartphone market, largely because new iPhones cost hundreds of dollars more than rival handsets. But Apple has wallpapered major cities with iPhone billboards, expanded distribution networks into smaller cities and applied for government permission to open its first retail stores in India.

The third-party retailers that currently sell Apple products have introduced payment plans known as EMIs, or equated monthly installments, to boost sales.

That "has been a game changer,” said Kishor Prabhu, owner of a phone shop in suburban Mumbai. "Indians are a bit cost-conscious. With the introduction of EMI, the middle-class and upper middle-class have shifted toward the iPhone and it is no longer a phone only for the elites.”

Cook said one of the challenges in India is the "brittleness” of the wireless infrastructure itself, making it difficult — and sometimes impossible — to watch video on a smartphone, a basic function elsewhere.

Still, India's demographics make corporate titans swoon. The median age is 27, nearly a full decade younger than in China. Only 40% of the mobile phones shipped in the last quarter of 2015 were smartphones, according to industry analyst Counterpoint Research, indicating the market still has huge growth potential.

To help find jobs for the 1 million Indians who enter the workforce every month, Indian Prime Minister Narendra Modi is trying to increase domestic manufacturing and has introduced incentives for tech companies to set up factories in India. He has met with Silicon Valley leaders including Mark Zuckerberg of Facebook, which sees India as its best chance to significantly expand its base of 1.55 billion users.

But Facebook faltered here this year when Zuckerberg's pet project, a no-cost mobile app for emerging economies called "Free Basics” — a sort of Internet for beginners — was blocked by regulators who ruled that it discriminated against other Internet sites.

Google Inc. has tried to make its Android smartphones — by far India's most popular — more suitable to the country's slow Internet connections. The Mountain View search giant now allows Indian users to operate its Maps app offline and plans to introduce free wireless Internet service at hundreds of train stations.

Even though hundreds of millions of mostly rural Indians still lack Internet access, it is a golden age for the Indian digital consumer. Everything from doctor's appointments to movie tickets can be booked online and a growing number of transactions are made using mobile wallets — all using apps designed by Indian companies.

"The consumer is very much alive and kicking and actually consuming here, and that's up to 1.3 billion people. The opportunity is huge,” said Radhika Aggarwal, cofounder of ShopClues.com, an e-commerce start-up that has been valued at more than $1.1 billion and targets middle-class consumers with unbranded clothing and other products.

The company was started by Indians who worked in Silicon Valley and returned as the Internet boom was beginning. Another company founded by Amazon.com alums, the e-commerce site Flipkart, has become the biggest Indian start-up to date, raising $6 billion in venture capital funding. Much of it came from U.S. investors — including Accel Partners of Palo Alto and Tiger Global Management of New York — writing big checks as the site nears a possible initial public offering.

The frenzy in 2015 created India's first Internet bubble, and new investment has slowed down markedly in the first two months this year. Modi's government is facing fresh calls to spur foreign investment when it unveils its annual budget in the coming week.

India's freewheeling digital realm also seems at odds with what critics call a clampdown on free speech, after authorities this month arrested a university student on sedition charges, accusing the student of organizing an event where anti-India slogans were chanted.

"Investors have realized they went a little nuts,” said Pankaj Jain, a partner in 500 Startups, a Mountain View-based venture fund that invested in 24 early-stage Indian companies in 2015.

"A lot of companies are shutting down, scaling back, laying off people ... but that's the normal course of business. It doesn't change the fact that China is still very uncertain and the global economy is still not growing very well. India is probably the most stable and fastest growing economy in the world right now so that's still going to attract a lot of people.”

The volatility has not daunted young Indian entrepreneurs. In the convention hall in Bangalore, four twenty something engineers and designers talked up their venture, eFyDo, a portal linking consumers with doctors and yoga teachers.

Their research showed that online healthcare was a $280-billion market in India, with some 140 competing start-ups. But three years after its founding, the site has 2,000 visitors a month. All four had given up full-time jobs — though one was working shifts at KFC — and were looking for an investor.

"We think this is a really important idea,” said cofounder Deepak Rathi. "Our goal is to change healthcare in India.”